GDP Data Confirms Gen Z Nightmare: The Era of Jobless Growth Is Here

The U.S. economy may have surged ahead at a 4.3% annual growth rate in the third quarter of 2025, a number far above economists’ expectations, but behind the headline growth lies a troubling truth: job creation has stalled, and wages remain stagnant. This marks the troubling start of a new economic era—one where growth occurs without the jobs to match it.

President Donald Trump, as expected, took a victory lap following the strong GDP numbers, celebrating what his team called the “Trump economic golden age” moving “full steam ahead.” But many economists, particularly those looking beyond the headline figures, were quick to point out that something crucial was missing from this boom: jobs.

A Tale of Two Economies: Spending Without Jobs

The third-quarter GDP report shows strong consumer spending, with households splurging on healthcare, services, and other essential goods. However, real disposable income remained flat—0% growth—meaning that Americans didn’t have more purchasing power to spend. Instead, they dipped into their savings or took on more credit, often to meet rising costs in sectors like healthcare.

Healthcare spending was particularly notable, with Americans spending more on outpatient care, hospital services, and nursing facilities than they have in years. This surge is partly due to the growing use of expensive GLP-1 weight-loss drugs and an aging population, pushing up medical prices.

But this wasn’t a typical discretionary boom. Rather, families were absorbing pressure, not signaling confidence. With inflation still sticky and wage growth largely absent, spending driven by necessity is far less sustainable than spending driven by rising paychecks. As KPMG’s chief economist Diane Swonk pointed out, this situation is “highly unusual.”

The Problem With the ‘Sugar High’ of Short-Term Gains

The economic boost from tax refunds and changes in withholding schedules may provide a temporary lift to spending in early 2026, but as Swonk warns, this could be a “sugar high” that masks deeper systemic issues. Short-term spending growth could lead to more inflationary pressure without solving the underlying problem of weak job creation and stagnant wages.

“We will feel more broad-based gains as we get into 2026,” Swonk said, “but at what price?”

The K-Shaped Economy: A Growing Divide

The U.S. economy is increasingly splitting into two parts: the affluent few and the struggling majority. The strong GDP number hides a deepening divergence between these two groups. While corporations reported massive gains—$166 billion in capital profits in Q3—businesses are not expanding their workforces to match the growth. Instead, they are squeezing more output from a shrinking or fixed workforce, a pattern that shows no signs of abating.

“We are seeing most of the productivity gains we’re seeing right now as really just the residual of companies being hesitant to hire and doing more with less,” Swonk explained. The role of artificial intelligence in this trend is still emerging, but the current reality is that businesses are growing without hiring.

The result? A “K-shaped” recovery, where one side of the economy thrives while the other side struggles.

Affluent Households vs. Struggling Workers

On one side of the K-shape, higher-income households continue to drive consumer spending, supported by strong stock market gains and rising home values. For them, things are looking good—but for lower- and middle-income households, it’s a different story. They are increasingly spending out of necessity rather than confidence, contributing to the affordability crisis that affects millions of Americans.

Even sectors like leisure and travel, which remain popular, are seeing demand concentrated among wealthier consumers. High-end vacations may be thriving, but overall, vacation activity is still below pre-pandemic levels. Swonk noted that vacation activity in August 2025 was the second-lowest on record for that month, trailing only August 2020.

The Fragility Beneath the Surface

The concern is that this two-speed economy is fragile. Spending driven by wealth effects can continue as long as the markets stay strong, but spending driven by necessity is far less resilient. If there’s a correction in the stock market or a shift in consumer confidence, the economy could take a sharp turn downward.

“When you’re carrying an economy by wealth effects and affluent households, as opposed to employment gains and generating new paychecks, you’re vulnerable,” Swonk warned. The danger lies in the disconnect between economic growth and job creation, a disconnect that is particularly concerning as automation and AI continue to reshape the workforce.

What’s Next?

As businesses become more efficient and technology reshapes work, there’s a looming question about how long this “jobless growth” can persist. The Gen Z workforce, which is entering the job market with high expectations, may find itself navigating a very different landscape than previous generations. Without job creation that matches economic growth, this generation may struggle to find stable, well-paying work—especially if they are competing with technological advances that reduce the need for human labor.

As Swonk concluded, “When you divorce growth from employment gains, you’ve got a problem.” The economic models we’ve relied on for decades are evolving, and the changes will likely leave many behind.